Annual Survey of Hours and Earnings 2016 release seminar 26 October 2016

Agenda 10.30 Introduction (Nick Palmer, ONS) 10.45 Annual Survey of Hours and Earnings - 2016 results 11.45 Analysis of the distribution of earnings across the UK using ASHE data 12.15 Closing remarks

ASHE 2016 Provisional results from the 2016 Annual Survey of Hours and Earnings James Scruton, Office for National Statistics

ASHE 2016 What is ASHE? Published today The ONS’s most detailed and comprehensive source of earnings information The official measure of the gender pay gap The official measure of the number of low paid jobs Published today 2016 provisional and 2015 revised results 2016 Low Pay results 2016 ASHE captures some of the early impact of the National Living Wage on estimates of earnings

Average Earnings

+2.2% (£527 in 2015) +1.9% (compared with 2015) Weekly earnings Median gross earnings for full-time employees Current prices £539 +2.2% (£527 in 2015) Constant (2016) prices +1.9% (compared with 2015)

Weekly earnings Median gross earnings for full-time employees

Continuous employment: Annual percentage change in median full-time gross weekly earnings for all employees and those in continuous employment 4.6% 2.2%

£28,200 +2.2% (£27,600 in 2015) Annual earnings Median full-time gross annual earnings £28,200 +2.2% (£27,600 in 2015)

Weekly earnings for full-time and part-time employees Median gross weekly earnings

Distribution of Earnings

+4.4% (£296 in 2015) +2.2% (from £1,035 in 2015) Earnings distribution Median gross weekly earnings for full-time employees Bottom 10% earn less than £309 +4.4% (£296 in 2015) Top 10% earn more than £1,058 +2.2% (from £1,035 in 2015)

Earnings distribution Median gross weekly earnings for full-time employees

Gender pay differences

Factors affecting the gender pay gap Women are more likely to work part-time compared to men More women tend to work in lower paid occupations compared to men The gender pay gap increases significantly between the ages of 30 and 40

Gender pay gap Median gross hourly earnings (excluding overtime) Full-time 9.4% -0.2 p.p. (9.6% in 2015) Part-time -6.0% +0.8 p.p. (-6.8% in 2015) All employees 18.1% -1.2 p.p. (19.3% in 2015)

Gender pay gap Median gross hourly earnings excluding overtime

Gender pay gap by hours worked Median gross hourly earnings excluding overtime

The gender pay gap across the pay distribution Median gross hourly earnings excluding overtime

Public and private sector pay

+3.4% (£500 in 2015) +0.7% (£590 in 2015) Public and private sector Median gross weekly earnings for full-time employees Private sector £517 +3.4% (£500 in 2015) Public sector £594 +0.7% (£590 in 2015)

Public and private sector Median gross weekly earnings for full-time employees (private sector as a proportion of public sector)

Earnings by region and occupation

Regional earnings by Region Median full-time gross weekly earnings

Growth in regional earnings since 2015 Median full-time gross weekly earnings

Earnings by occupation Median full-time gross weekly earnings £539 £798 £726 £594 £498 £468 £423 £356 £355 £353

Growth in earnings by occupation since 2015 Median full-time gross weekly earnings

Components of pay and paid hours

Components of pay Proportion of mean gross weekly earnings

Hours worked Mean full-time weekly paid hours Males

Low paid jobs

Interpreting the low pay estimates The low pay estimates are not a measure of non-compliance with the NMW/NLW The 2016 low pay results are not comparable with earlier years due to the timing of the introduction of the NLW If the employee’s (25+) pay period started before the 1 April then they did not need to be paid the NLW until the following pay period These cases have not been classed as low pay as long as the employee was being paid above the existing NMW rate (£6.70)

Measuring low pay for those 25 years and older in 2016

362k jobs below NMW/NLW 23k jobs 29k jobs 306k jobs Jobs paid below National Minimum/Living Wage, 2016 362k jobs below NMW/NLW or 1.3% of UK employee jobs 18-20 yrs 23k jobs or 2.1% of total 21-24 29k jobs or 1.4% of total 25+ yrs 306k jobs or 1.3% of total

Number and percentage of jobs paid below the National Minimum/Living Wage by low paid industry groups, UK, April 2016

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Analysis of the distribution of earnings across the UK using ASHE 2016 official sensitive Analysis of the distribution of earnings across the UK using ASHE 2016 Dr. Amina Syed Daniel Ollerenshaw

Distribution of earnings and its growth: Table of contents Distribution of earnings and its growth: over time by region by gender by working pattern by gender for full-time and part-time workers by skill group by age

official sensitive Distribution of earnings over time

Distribution of earnings over time The UK’s earnings distribution has shifted over the years from a relatively smooth, positively skewed distribution to a sharply-edged distribution, with a spike at around £7.20 per hour – the prevailing adult National Living Wage (NLW) in April 2016.

Growth in hourly earnings

Cumulative distribution of earnings growth

Growth in hourly earnings 11% of people experienced a nominal pay freeze in the year to April 2016. There is a noticeable bump at 10.8% earning growth representing a shift from the £6.50 an hour National Minimum Wage (NMW) to the £7.20 an hour National Living Wage (NLW). Median of the growth distribution is around 2.5% for 2016.

Regional earnings distribution official sensitive Regional earnings distribution

Regional earnings distribution London has the lowest proportion of people on the NLW. London has a higher proportion of people on higher pay brackets (£30 plus). Northern Ireland has the highest proportion of people receiving the NLW.

Growth in hourly earnings by region official sensitive Growth in hourly earnings by region

Growth in hourly earnings by region For most regions the biggest peak is clustered around zero growth with around 10%-13% of workers receiving no wage increase. Northern Ireland showed the biggest bump at 10.8% growth which represents a shift from the NMW to the NLW. Scotland experienced a higher share of pay increases at around 2% than any other region.

Earnings distribution by gender

Earnings distribution by gender More men tend to be in higher pay brackets. The proportion of women closer to the NLW is higher than men.

Growth in hourly earnings by gender

Growth in hourly earnings by gender The most common nominal pay rise was around zero percent for both men and women – accounting for around 12% of men and 11% of women. A greater share of women (3.5%) received a pay growth of around 10.8% in 2016 than men (2.8%)- representing a shift from the NMW to the NLW.

Earnings distribution by working pattern

Earnings distribution by working pattern More part-time workers earn an hourly wage close to the NLW than full-time workers in 2016. Greater numbers of people earning wages more than £10.50 per hour are working full-time.

Growth in hourly earnings by working pattern

Cumulative chart of growth in hourly earnings by working pattern

Growth in hourly earnings by working pattern A greater share of part-time workers compared to full-time workers experienced nominal hourly earnings growth between 10% and 11% - which reflects the switch from the NMW to the NLW. The most common rate of growth of nominal hourly earnings for both full-time and part-time workers is around zero percent.

Earnings distribution for full-time and part-time workers by gender

Earnings distribution for full-time and part-time workers by gender

Earnings distribution for full-time and part-time workers by gender A greater share of women who work full-time earn wages close to the NLW compared to men in 2016. A greater share of men who work part-time earn wages close to the NLW than women. The earnings distribution for both genders after controlling for working pattern are then fairly closely matched at higher wage rates.

Growth in hourly earnings for full-time workers by gender

Growth in hourly earnings for part-time workers by gender

Growth in hourly earnings by working pattern for each gender A greater share of men working part-time compared to women have seen the 10-11% pay rise- reflecting a switch from NMW to NLW. This is likely to reflect the smaller base of men who are part-time.

Skill groups 4 groups: low, lower-mid, upper-mid, upper Based on SOC2010 Skill group Proportion of full-time workers, ASHE 2016 (approx.) Proportion of part-time workers, ASHE 2016 (approx.) Typical occupations 1 (low) 8% 20% Labourers (e.g. agriculture, construction), cleaners & basic admin workers 2 (lower-mid) 30% 51% Secretaries, carers, hairdressers, cashiers, machine operatives, transport drivers 3 (upper-mid) 29% 10% Skilled trade workers, associate professionals and technical occupations 4 (upper) 34% 18% Professionals (e.g. teachers, doctors, scientists, engineers, managers, directors) Skill is defined in terms of duration of training/experience needed to perform the job

official sensitive Full-time workers

official sensitive Full-time workers

Full-time workers

Full-time workers

Full-time workers

Full-time workers

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Full-time workers

Full-time workers

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Full-time workers

Main points: full-time workers official sensitive Main points: full-time workers Increasing compression at the minimum wage, particularly for ‘low’ skill group Upper and upper-mid distributions have shifted to the right, but no apparent change in the overall shape of the distributions

official sensitive Part-time workers

Part-time workers

Part-time workers

Part-time workers

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Part-time workers

Main points: part-time workers official sensitive Main points: part-time workers Large clustering of ‘low’ skill part-time workers at NLW/NMW in last few years Evidence of some minimum wage compression for lower-mid and upper-mid groups (relative to full-time workers) ‘Spike’ declined between 2015 and 2016 – could be because previous NMW applied for those aged 21+ while NLW applies for those aged 25+

Age bands 4 groups: 16-24, 25-34, 35-49, 50-64 Age band % of FT (2016) % of PT (2016) (2003) 16-24 10.0 11.6 19.1 20.7 25-34 26.3 25.6 17.8 16.5 35-49 36.6 40.0 31.0 35.9 50-64 25.9 22.4 26.9 23.7 65+ 1.2 0.5 5.3 3.3 Total 100

Full-time workers

Full-time workers

official sensitive Part-time workers

official sensitive Part-time workers

Main points: age bands official sensitive Younger workers’ distribution is to the left of other age bands (which are fairly closely aligned) Some evidence that young people are being paid NLW (for both full-time and part-time). Seen by the ‘splitting’ of 16-24 distribution between 2015 and 2016

official sensitive Hourly earnings growth by skill group, cumulative percentage frequency, 2016

official sensitive Hourly earnings growth by age group, cumulative percentage frequency, 2016

To summarise… official sensitive In 2016, there was a continuation of the trend for a growing concentration of pay at the bottom of the UK’s earnings distribution. London has the least number of people on the NLW and Northern Ireland has the most number of people on the NLW. A greater share of women are earning around the NLW in 2016 compared to men. In 2016, a greater share of part-time workers experienced hourly pay growth of around 11% (the change from the old NMW to the NLW) compared to full-time workers. Tentative evidence of young people receiving the NLW, even though it is not a legal requirement. Those moving from the previous NMW to the NLW are almost exclusively in the ‘low’ skill group, but are evenly distributed across age bands.